Pound rallies on surprisingly strong UK PMIs

Philip McHugh November 24th 2023 - 2 minute read

The pound trended broadly higher on Thursday, supported by the UK’s surprisingly upbeat UK PMIs.

Sterling is holding its ground so far this morning, with GBP/EUR flat at €1.1500 and GBP/USD ticking buoyed at $1.2548. GBP/CAD is rangebound at CA$1.7181, while GBP/AUD and GBP/NZD hold steady at AU$1.9117 and NZ$2.0715, respectively.

Looking ahead, could some hawkish comments from European Central Bank (ECB) President Christine Lagarde help to lift the euro this morning?

What’s been happening?

The pound strengthened through yesterday’s session as GBP investors welcomed the UK’s latest PMIs.

November’s preliminary figures reported the UK’s private sector unexpectedly returned to growth this month after the services index jumped from 49.5 to 50.5.

The surprisingly positive PMIs helped to ease UK recession fears and allowed Sterling to claw back the bulk of Wednesday’s losses.

The Eurozone’s own PMI figures also beat expectations, however as the bloc’s private sector remained in contraction these gains proved limited.

Elsewhere, the minutes from the European Central Bank’s (ECB) latest policy meeting, highlighted policymakers’ uncertainty regarding the Eurozone’s economic outlook, which also stifled EUR demand.

Meanwhile, the US dollar was left vulnerable to its peers on Thursday as the closure of US markets for Thanksgiving resulted in thin trading conditions in the currency.

What’s coming up?

Turning to today’s session, the spotlight this morning is likely to be on a speech by ECB President Christine Lagarde. If Lagarde seeks to downplay talk of interest rate cuts she could provide a boost to the euro.

The publication of Germany’s business climate index may also be supportive of the single currency this morning as economists forecast morale will have continued to improve this month.

For USD investors the focus will be on the latest US PMIs, with the US dollar potentially sliding if November’s preliminary figures report that US private sector activity weakened again.

Meanwhile, in the absence of any notable UK data, any movement in the pound may be driven by market risk sentiment. Could a broadly upbeat mood help to underpin GBP exchange rates?

Written by
Philip McHugh

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